What Investors Need to Know About the Housing Shortage – Episode 760

It’s no secret the US is in the depths of a housing shortage. Today we’re going to talk about this and what it means for you as an investor.

We’re going to discuss some basic economics, including how a housing shortage happens. I’ll share some interesting statistics, and my opinion on how investors should navigate this housing shortage. Please join me for this episode of Investing in Real Estate!

More About This Show 

First let’s start with a foundational understanding of housing market economics. In a normal housing market, there should be about a 4-6 month supply of houses. That’s what we want, an equilibrium at about six-months. Anything less than that is considered a shortage.

Let’s dive into some interesting stats:

• A report by WSJ says that on average, the US built 276,000 fewer homes between 2001-2020 compared to the time period between 1968-2000.
• To keep up with the prior pace, there should have been 5.5 million more units of housing built by now.

This particular shortage was of course thanks to the pandemic. Everyone knows it has been harder to do business, there have been supply chain issues, and a lot of industries slowed down.. Building houses is no exception. There’s also less existing inventory because a lot of people are simply not selling like they might otherwise.

What does all of this mean for investors?

As you know, one of the most important components of making a solid investment is buying right – and that can be hard to do right now. When everything is overpriced, you are likely to end up overpaying.

It’s really a supply and demand issue. The only way for prices to go down is for the inventory to go up.

Be cautious trying to invest right now unless you know you’re getting a good deal and making solid returns (see my IRR video for more details).

And if you have the means to build or get into new construction, I think that’s a really solid way to make a difference. I’m super passionate about our new construction rental properties for many reasons… including being part of the solution to this affordable housing crisis.

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